Deflation Probabilities – January 9, 2020 Update

While I do not agree with the current readings of the measure – I think the measure dramatically understates the probability of deflation, as measured by the CPI – the Federal Reserve Bank of Atlanta maintains an interesting data series titled “Deflation Probabilities.”

As stated on the site:

Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2024.

A chart shows the trends of the probabilities. As one can see in the chart, the readings are volatile.

As for the current weekly reading, the January 9, 2020 update states the following:

The 2019–24 deflation probability was 0 percent on January 8, 2020, where it has remained since December 16, 2019. The 2018–23 deflation probability was also 0 percent on January 8, 2020, where it has remained since July 8, 2019. These deflation probabilities, measuring the likelihoods of net declines in the Consumer Price Index over the five-year periods starting in early 2018 and early 2019, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2018 and April 2019 and the 10-year TIPS issued in July 2013 and July 2014.

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I post various economic indicators and indices because I believe they should be carefully monitored. However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

Monthly Archive To 2009

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